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Trace pricing and my indecision over what to do next

When I first heard about Trace Lofts a year ago I didn’t get too excited about it. Who would want to live at 12th and Madison? At the time all the night life action was further west on the Pike-Pine corridor. Now a year later the 12th and Madison area has Havana and will be home to the new Cha-Cha and the Gun Club. Things are looking up and so my interest has changed. As I found out more and more about Trace Lofts I got more and more excited. Unfortunately when it came time to get a reservation appointment I was ninth! Going into my appointment not knowing much about the pricing except their large price ranges my unit choices were:

#502 – 797 sq ft – west facing

#402 – 797 sq ft – west facing

#301 – 855 sq ft – south-west facing corner

#201 – 855 sq ft – south-west facing corner

Sadly when I got there #201 and #301 were already gone. Fortunately my first two picks were available but the really sad news was that when I learned of the narrower price ranges #502 was likely going to be $770/sq ft and #402 was likely going to be $690/sq ft. I left having reserved #502. I then IM’d with my (Redfin) agent and we spent the night looking at comps (I literally did not sleep that night.) Turns out very few units have ever sold on Capitol Hill for over $600/sq ft. Granted, Trace is pretty cool, but there are some pretty cool condos in that small neighborhood around Trace. Consider there is 1310 Union, the Firehouse and the Monique Lofts. A little further away you find Pike Lofts, 615 E Pike, the Crawford and even Brix further up the street. Several of these places have had re-sales in the last month sub-$500/sq ft. Why would I pay a $200/square foot premium considering that Trace was going to be ready this summer?

Considering this I got cold feet and backed out of #502. At $690/sq ft #402 wasn’t any better. At $585/sq ft #301 was somewhat reasonably priced but was long gone (along with #201) before even my first appointment. I then weighed the options between #303, 722 square feet at an estimated $520/sq ft and #408, 769 square feet at an estimated $617/sq ft. #303 was a better value, was west facing which is what I really wanted (though it’s unclear how much of a view the 3rd floor will have) but the floor plan wasn’t as spacious as #408 and lacked the 160 square foot terrace that 408 sported (though I’m worried the terrace wall will be too high and obscure the view of Rainer, etc while sitting on the couch.) In the end I went with 408. If I’m going to live somewhere long term I reasoned that I really needed a deck so I can grill and enjoy the outdoors. Now though I’m wishing I took the cheaper unit.

A month later I’m still not feeling confident in my decision even as others have gone and reserved units I thought were way over priced. My agent is also waging a campaign to get me to back out of Trace and today we went and looked at #101 at The Crawford. $525,000 for 1100 square foot and a hot tub within feet of Linda’s, Capitol Club and the Chapel? Hard to say no but it has no view at all and felt much too dark. I love my views. It is likely going to be bid up to $550,000 and I’d really like to stay below $600,000 though I almost broke that rule at Trace.

And so I continue to be torn. I’d really like to live at Trace but it feels over priced.

To confirm this I compiled the chart below by building a spreadsheet of all the units, their square footage and their price ranges. For some units I had estimates on what the price would be based on discussions with the Trace real estate agents during my reservation appointments.

So with the sub prime lending market collapse, wicked re-sales continuing to pop up (i.e. Merrill Place) and a lot of inventory on the horizon why should I lock myself in? Why not wait until Trace Lofts, Trace North, Mosler Lofts and Rollin are built and then have my pick of those four buildings plus the left over inventory from 2200, Olive 8 and Cosmo? Even better, why not rent a nice top floor west facing unit at Trace North for likely less than it would cost me in mortgage+HOA+tax? Perhaps I can do much better in the stock market using leverage to buy undervalued stocks.

I know the majority of people likely base their decisions on feel much like I did at Meritage. Now with so much money on the line I’m approaching things much more analytically, perhaps too much so. I’d love to here your thoughts on how you’re handling your next purchase. Do you build intricate spreadsheets, spend hours on HouseMath and run a website just so you can have a better handle on market dynamics? :)

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Herd mentality is a powerful thing. Right now you’re feeling left out of the big run towards the newest and shiniest condos, as if you’ve been passed over for the popular clique at school. If real estate prices ever cool here, the herd will quicklyl start thundering in the opposite direction, and renting and saving will become the new ‘in’ thing to do.

marksparky

Herd mentality is a powerful thing. Right now you’re feeling left out of the big run towards the newest and shiniest condos, as if you’ve been passed over for the popular clique at school. If real estate prices ever cool here, the herd will quicklyl start thundering in the opposite direction, and renting and saving will become the new ‘in’ thing to do.

Kelly

PLEASE do not sit by me at Town Hall on the 28th. As soon as I see your arms flailing through the air and spreadsheets flying to the ground I am putting on my Mary Kate Olson sunglasses and slipping out the back.

I think you should put Meritage for sale (like tomorrow) and do a rent back until you find a kick ass resale. Cut it out with this pre-sale BS.

Leave this to a professional.

Kelly

PLEASE do not sit by me at Town Hall on the 28th. As soon as I see your arms flailing through the air and spreadsheets flying to the ground I am putting on my Mary Kate Olson sunglasses and slipping out the back.

I think you should put Meritage for sale (like tomorrow) and do a rent back until you find a kick ass resale. Cut it out with this pre-sale BS.

Leave this to a professional.

Foster

Trace is overpriced. The Seattle market is about to be overflowing with inventory.

Foster

Trace is overpriced. The Seattle market is about to be overflowing with inventory.

Dan Ji

I hear you when you feel like you have a case of analysis paralysis. I was definitely in the same boat, and to a lesser extent am still today. I do know that you can make numbers tell you any kind of story – if you try hard enough.

I agree with marksparky… herd mentality is powerful – but it goes both ways.

From what I understand, you’ll be living in the condo so… buy what makes sense to you/makes you happy (of course I’m not implying that homework isn’t necessary). After all, you live there with your senses & not with your cpu. If there’s one bad thing to real estate on the web, it’s that it’s easy to commoditize things that are a lot more than facts & figures.

Figure that this is a place to live first, and a potentially rewarding investment second. In fact, I don’t really consider a person’s primary house as an investment at all. (You have a place in Canada for that ey?)

Don’t forget to use empirical IN ADDITION to statistical analysis.

Dan Ji

I hear you when you feel like you have a case of analysis paralysis. I was definitely in the same boat, and to a lesser extent am still today. I do know that you can make numbers tell you any kind of story – if you try hard enough.

I agree with marksparky… herd mentality is powerful – but it goes both ways.

From what I understand, you’ll be living in the condo so… buy what makes sense to you/makes you happy (of course I’m not implying that homework isn’t necessary). After all, you live there with your senses & not with your cpu. If there’s one bad thing to real estate on the web, it’s that it’s easy to commoditize things that are a lot more than facts & figures.

Figure that this is a place to live first, and a potentially rewarding investment second. In fact, I don’t really consider a person’s primary house as an investment at all. (You have a place in Canada for that ey?)

Don’t forget to use empirical IN ADDITION to statistical analysis.

Dan Ji

“Perhaps I can do much better in the stock market using leverage to buy undervalued stocks.”

In the short term, I think the answer is a resounding YES to being able to do much better. The 1 million dollar question of course is “how do you know what ‘undervalued’ is when you see it”?

Dan Ji

“Perhaps I can do much better in the stock market using leverage to buy undervalued stocks.”

In the short term, I think the answer is a resounding YES to being able to do much better. The 1 million dollar question of course is “how do you know what ‘undervalued’ is when you see it”?

Dan, I’m a fan of the Benjamin Graham and Warren Buffet school of investing.

Ben K

Consider the tax implications if you decide to sell Meritage and buy resale, namely capital gains. Even with Redfin direct, it’ll likely cost around 6.5% in trans fees , plus cap gains on top of that. Talk it over with your tax guy/gal to see where you’d stand.

Ben K

Consider the tax implications if you decide to sell Meritage and buy resale, namely capital gains. Even with Redfin direct, it’ll likely cost around 6.5% in trans fees , plus cap gains on top of that. Talk it over with your tax guy/gal to see where you’d stand.

Ben, yeah, I went in expecting to sell in less than two years so I’ve factored those ‘costs’ in. I sure wish the trans fees were lower. 6.5% is ridiculous. Fortunately my closing costs going in were very low.

Ben, yeah, I went in expecting to sell in less than two years so I’ve factored those ‘costs’ in. I sure wish the trans fees were lower. 6.5% is ridiculous. Fortunately my closing costs going in were very low.

If it doesn’t feel right, it probably isn’t. The only way I’d get into any of this new construction is if you found *your* favorite unit which wasn’t priced like a favorite unit in the building, or if you know the developer and can get the bro deal.

Otherwise, go find an existing building. They are out there. I’m sitting in a 1200 square footer with a phat view on lower Queen Anne right now. $300 sq/ft… purchased a few months ago.

If it doesn’t feel right, it probably isn’t. The only way I’d get into any of this new construction is if you found *your* favorite unit which wasn’t priced like a favorite unit in the building, or if you know the developer and can get the bro deal.

Otherwise, go find an existing building. They are out there. I’m sitting in a 1200 square footer with a phat view on lower Queen Anne right now. $300 sq/ft… purchased a few months ago.

EconE

Matt…I’m curious how presale financing works. Does the buyer lock in an interest rate/loan upon submission of their deposit or are they at the mercy of the banks when the building is completed and it is time to move in?

EconE

Matt…I’m curious how presale financing works. Does the buyer lock in an interest rate/loan upon submission of their deposit or are they at the mercy of the banks when the building is completed and it is time to move in?

EconE, you’re often able to lock-in with the onsite/preferred lender. I did not pursue that option when it was available at Meritage so I can’t speak to the details, perhaps some others can. I know there can be problems when the project gets delayed as it can affect the rate lock.

EconE, you’re often able to lock-in with the onsite/preferred lender. I did not pursue that option when it was available at Meritage so I can’t speak to the details, perhaps some others can. I know there can be problems when the project gets delayed as it can affect the rate lock.

EN

I agree with your last statement. Wait a few months and you’ll have lots of inventory to choose from. I’ve been following all the sales at the Cosmo and have my own xls of all the sales/resales. 49 units have closed and i know of at least 19 units that are up for resale – and several others are up for rent.

EN

I agree with your last statement. Wait a few months and you’ll have lots of inventory to choose from. I’ve been following all the sales at the Cosmo and have my own xls of all the sales/resales. 49 units have closed and i know of at least 19 units that are up for resale – and several others are up for rent.

Rachel

Speaking for myself: I know the unit we are getting at Trace is less than yours, but we love it. I agree with what Dan said, I don’t think of my primary residence as an investment. I think that if you are able to hold on to it until the inventory storm passes, you should be fine.

Rachel

Speaking for myself: I know the unit we are getting at Trace is less than yours, but we love it. I agree with what Dan said, I don’t think of my primary residence as an investment. I think that if you are able to hold on to it until the inventory storm passes, you should be fine.

andy

I agree with Rachel for the most part, but acknowledge that those of us with early reservation appointments had a much better shot at finding a good fit. For the big money you should pick a place that you’re really stoked about.

andy

I agree with Rachel for the most part, but acknowledge that those of us with early reservation appointments had a much better shot at finding a good fit. For the big money you should pick a place that you’re really stoked about.

I totally understand your position. Getting caught up in the heard mentality. It seems in the past people were making great profits buying during the presales. Then came the reservations to buy, special appointment only events, and now I’ve seen reservations to make reservations. The whole process is designed to minimize the “money left on the table” by developers. These reservations, special appointments, and lotteries are designed to determin the actual market price for a condominium. You can’t fault a developer for trying to maximize their investment. Escpecially in light of escellating land prices and construction cost. Interestingly, buyers are becoming much much more savy and knowledgable. With the help of websites like this one, zillow, and condocompare.com, buyers are able to see what all buildings are selling for and are wise to the reality of the market when they go to these event. Buyers can still do really well when they buy during a presale. Some developers want to get in and get out and put their development energies in the next project rather while some want to eek out every dime they posibly can. Neither meathod is inherently better than the other. Buyers just need to know what arena they are playing in. I really appreciate sites like condocompare.com where you can compare building analytics and dive into the units and compare them too. It all makes for an efficient market and ensures that even when buyers buy at the high end of the $/sq ft, they are making an informed decision.

I totally understand your position. Getting caught up in the heard mentality. It seems in the past people were making great profits buying during the presales. Then came the reservations to buy, special appointment only events, and now I’ve seen reservations to make reservations. The whole process is designed to minimize the “money left on the table” by developers. These reservations, special appointments, and lotteries are designed to determin the actual market price for a condominium. You can’t fault a developer for trying to maximize their investment. Escpecially in light of escellating land prices and construction cost. Interestingly, buyers are becoming much much more savy and knowledgable. With the help of websites like this one, zillow, and condocompare.com, buyers are able to see what all buildings are selling for and are wise to the reality of the market when they go to these event. Buyers can still do really well when they buy during a presale. Some developers want to get in and get out and put their development energies in the next project rather while some want to eek out every dime they posibly can. Neither meathod is inherently better than the other. Buyers just need to know what arena they are playing in. I really appreciate sites like condocompare.com where you can compare building analytics and dive into the units and compare them too. It all makes for an efficient market and ensures that even when buyers buy at the high end of the $/sq ft, they are making an informed decision.

PhilW

I bought a new townhouse near downtown San Jose in late ’97 (dotcom boom was, well, booming). They managed to build these well built 2 story townhouses for less than $100/sq ft. Mine had 2 bedrooms, 2 & 1/2 baths, and attached garage (walk in closets both bedrooms).

My point? Somebody is making a lot of money on these projects and it ain’t you.

PhilW

I bought a new townhouse near downtown San Jose in late ’97 (dotcom boom was, well, booming). They managed to build these well built 2 story townhouses for less than $100/sq ft. Mine had 2 bedrooms, 2 & 1/2 baths, and attached garage (walk in closets both bedrooms).

My point? Somebody is making a lot of money on these projects and it ain’t you.

PhilW

cont. #7 Just to clarify – $100/sq ft does not inlude what the builder paid for the land.

PhilW

cont. #7 Just to clarify – $100/sq ft does not inlude what the builder paid for the land.

Julie

I see dan and phils points. theres always going to be something better and your going to drive yourself crazy when you look at different listings that might be “better” . 500K gives you plenty of options. if you don’t like it dont get it.

Julie

I see dan and phils points. theres always going to be something better and your going to drive yourself crazy when you look at different listings that might be “better” . 500K gives you plenty of options. if you don’t like it dont get it.

Eric

When I look for a place to buy, there are neighborhoods/buildings that I will buy in and neighborhoods/buildings that I won’t buy in. I fast forward 3-5 years in my mind and imagine where I think the neighborhood is going. Even if the price is right, if I don’t have faith that the neighborhood is going in the right direction, I don’t want a piece of it.

After that, I do the research. I look at all the properties and the comps for the area. It gets to a point where if you catch me in the elevator offhand and mention the price for something in the neighborhood, I can tell you if the price sounds high or not.

When it’s “go time”, I can walk into a place and immediately tell you if I think the place is worth the price. There is no agony. There is no endless spreadsheet math. It just fits. And if it doesn’t immediately fit, I walk out. I want a deal and if I can’t get a deal, there’s thousands of other places out there. I can wait.

What you seem to have done is have the mindset, “Given the fact that I purchased a unit in this building, I’ll then go research the comps…” and “I wasn’t interested in the neighborhood but then a cool restaurant opened up nearby…”.

This seems ass backwards. It’s like buying a car and then doing the test drive. Or getting engaged and then finding out what kind of woman you’ve landed. I agree with the other people that have commented that if you feel this much anxiety, then you probably haven’t made the right decision.

Eric

When I look for a place to buy, there are neighborhoods/buildings that I will buy in and neighborhoods/buildings that I won’t buy in. I fast forward 3-5 years in my mind and imagine where I think the neighborhood is going. Even if the price is right, if I don’t have faith that the neighborhood is going in the right direction, I don’t want a piece of it.

After that, I do the research. I look at all the properties and the comps for the area. It gets to a point where if you catch me in the elevator offhand and mention the price for something in the neighborhood, I can tell you if the price sounds high or not.

When it’s “go time”, I can walk into a place and immediately tell you if I think the place is worth the price. There is no agony. There is no endless spreadsheet math. It just fits. And if it doesn’t immediately fit, I walk out. I want a deal and if I can’t get a deal, there’s thousands of other places out there. I can wait.

What you seem to have done is have the mindset, “Given the fact that I purchased a unit in this building, I’ll then go research the comps…” and “I wasn’t interested in the neighborhood but then a cool restaurant opened up nearby…”.

This seems ass backwards. It’s like buying a car and then doing the test drive. Or getting engaged and then finding out what kind of woman you’ve landed. I agree with the other people that have commented that if you feel this much anxiety, then you probably haven’t made the right decision.